After all that hoopla, I eventually got a part-time job with my friend’s father, who is an ophthalmologist in Los Gatos. Unfortunately, it was after I had terminated my Matsco loan agreement. Although I no longer had a loan contingency, it had been 4 months since I had last seen a patient, and I wanted to keep my clinical skills from atrophying. I was also hoping that this job would help me to finally obtain some sort of equipment financing.
Even though I probably could have initiated another application with Matsco, I decided to pass because I had such a sour experience with them originally. I just didn’t want to deal with them again. Instead, I chose to go with ProMed, which is a medical financing brokerage firm with similar underwriting guidelines. Ironically, these guys didn’t even care whether I had a part-time job or not. They actually found me an offer just based on my pro forma, but for smaller amount than what I had requested.
Matsco had originally approved a loan for $340,000, of which a third of it was unsecured. I thought that I would have a decent shot of obtaining just as much with ProMed, especially since my financials were stronger and I was closer to opening doors. Also, the majority of my loan request was for secured equipment financing this time. I requested $300,000 for equipment and $50,000 for leasehold improvements. My current equipment budget is actually $220,000, but I wanted to have the option to purchase lasers, a B-scan probe, and a fluorescein angiogram fundus camera also. I’m actually planning to buy these additional items 6 months to a year into my practice, but I thought it would be nice to have the option of getting them sooner. I’ll explain my thought processes of splurging on equipment in a later post.
Anyway, ProMed required an application, another credit check, pro forma, personal tax returns, and a personal financial statement. Since my credit report had received so many hard inquiries, I actually signed up for credit monitoring services with Equifax and Experian for $14.95 per month each. My current FICO score is still excellent at 770, but is 20 points from its high a few months ago. So, if you’re planning to start a practice, make sure you pad your credit score as much as possible. It will go down significantly throughout this process.
It took over 10 days for me to get a response, and they ended up offering $200,000 in equipment only through U.S. Bank. Hey, it’s better than nothing, and I’ll take it! It would have been nice to get approved for the full requested amount, but it just means that my working capital will be tighter. I should still be able to make things work out. I definitely have to hold off on certain equipment purchases, but all my minimum necessities should be covered. As for my leasehold improvements, I’ll probably end up going with a cash-secured loan, of which I’m still not sure of its utility. I’ll go over this in a later post too.
Once I received the approval letter, I jumped on it immediately, signing the commitment letter and paying a $500 nonrefundable commitment fee. Although I didn’t get the amount I wanted, I’m actually very happy with the terms. It will be a 10 year loan at a fixed rate in the high 7% to low 8% range depending on the week I close the loan. There are no prepayment penalties, and I will be able to pay down additional principle with higher monthly payments or refinance in the future. The closing costs will be 1% of the loan amount. Once again, U.S. Bank does not require me to hold a part-time associating position. I think these terms are as fair as they will get for a startup. I’ll take it!
I can definitely breathe a sigh of relief now. Worse comes to worse, I still know that my practice is 100% a go. I will still have some financial challenges ahead, but nothing which I won’t be able to overcome.
Tony Urresti was my ProMed broker, and he was great about corresponding with me throughout the entire process. I really appreciated how he stuck with me despite the odds being stacked up against me. He actually still tried to get me the full requested amount even after I had already been approved for $200,000. Once again, Tony gave me the same spiel as all other financing companies I had approached previously: I would’ve had no problem getting a loan for the full amount 3 years ago, but that it’s way different these days. This economy really must be a lot worse than I had originally thought. Being a physician just doesn’t matter anymore. A startup is a startup is a startup, and 80% of them fail. We are no longer considered any different, even though most of us know that physicians (M.D.’s & D.O’s) rarely go out of business. Hopefully, by the time you decide to start a practice in a few years, things will be better.
As for Funding Well Capital, who told me a few months ago that I was “pre-approved” by application only, they were ready to move forward when I originally wanted $50,000 in equipment financing. However, ever since I asked for $180,000, I never heard a peep from him for over 20 days. I’m not going to even bother to follow up with this guy.